U.S. Cellular selling off Midwest markets to Sprint

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Today, U.S. Cellular and Sprint announced a deal where U.S. Cellular would transfer the rights of some spectrum in certain Midwest markets to Sprint for $480 million and stop doing business in those areas.

The spectrum involved in the transaction is solely on the PCS band (1.9GHz). This spectrum is extremely valuable to Sprint because nearly all of its network lies on that band currently. The iDEN network residing on the ESMR 800 band does not count since it is in the process of being shut down. In the affected markets, Sprint has at least 30MHz of PCS spectrum, though most of it is allocated toward CDMA2000 services as opposed to LTE. While the full details of the transaction have not yet appeared, potentially at least 20MHz of spectrum will be transferred to Sprint.

This spectrum will almost certainly be put to use for its PCS LTE network through its Network Vision program instead of beefing up its CDMA2000 network, as Sprint is smart enough to realize it needs to allocate as much of its resources as it can towards LTE. The amount of spectrum being transferred will allow for a full 10×10 LTE carrier on PCS to be deployed in those markets.

The major markets affected, according to U.S. Cellular, are Chicago, St. Louis, central Illinois, and “three other Midwest markets” that are unspecified at this time. The Chicago divestiture is interesting, given that U.S. Cellular’s corporate headquarters are there.

The affected states are Illinois, Indiana, Michigan, Missouri, and Ohio. Note that this is only PCS spectrum. All of U.S. Cellular’s 700MHz spectrum in these markets are being retained. The AWS spectrum it has is being retained as well, though none of it is currently used. This divestiture also includes the subscribers in these areas. Currently, the fate of those subscribers are not yet determined, as U.S. Cellular is still working out a transition plan with Sprint. It is entirely possible that U.S. Cellular could return to do business in these markets by offering LTE service exclusively, instead of CDMA/LTE service.

With this transaction, U.S. Cellular will eliminate at least a thousand jobs, shut down hundreds of retail and network locations, and lose 585,000 subscribers (10% of its total subscriber base) within two years. While the timeline has not been hammered out yet, Sprint may be on the hook to pay for U.S. Cellular’s presence in those markets for up to two years.

The fact that U.S. Cellular is doing this suggests that it believes that shrinking its footprint to focus on fewer areas and increase profits in those areas is a viable business model. Potentially, U.S. Cellular will make other deals to sell off extraneous spectrum (like its largely unused AWS spectrum in markets it does not do business in) as well as network sharing deals to reduce costs in markets it wishes to maintain.

U.S. Cellular has put up a website with some information about the deal and an FAQ page. Visitors can submit questions to be added to the FAQ, but the response right now for most questions is that nothing is going to change at this time, but it will be updated when there are more details.

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